World Trade Organization (WTO)
Meaning: The World Trade Organization (WTO) is the
only global international organization dealing with the
rules of trade between nations. The goal is to help
producers of goods and services, exporters, and
importers in the conduct of international trade. Its main
aim is to ensure smooth flow of trade. The World Trade
Organization (WTO) was established in 1995.In 1999,
there were 135 member countries in the WTO
Functions: The following are the functions of WTO:
1. It facilitates the operations, implementations and
administration of
the objectives of Trade agreements.
2. It provides negotiation facilities among member
countries for smooth
world trades.
3. It helps for the settlement of disputes between the
member countries.
4. It co-operates with International Monetary Fund and
the Word Bank
to get greater coherence in global economic policy
making.
Merits:
1. The system helps to promote peace.
2. Disputes are handled constructively.
3. Rules make life easier for all.
4. Free trade cuts the costs of living.
5. It provides more choice of products and qualities.
6. Trade raises incomes.
7. Trade stimulates economic growth.
8. The basic principles make life more efficient.
9. Governments are shielded from lobbying.
10. The system encourages good government.
History
The WTO came into being on 1 January 1995, and is
the successor to the General Agreement on Tariffs and
Trade (GATT), which was created in 1947, and
continued to operate for almost five decades as a de
facto international organization.
The World Trade Organization deals with the rules
of trade between nations at a near-global level; it is
responsible for negotiating and implementing new
trade agreements, and is in charge of policing
member countries' adherence to all the WTO
agreements, signed by the majority of the world's
trading nations and ratified in their parliaments.
Most of the issues that the WTO focuses on derive
from previous trade negotiations, especially from
the Uruguay Round. The organization is currently
working with its members on a new trade
negotiation called the Doha Development Agenda
(Doha round),
The WTO has 153 members, which represents more
than 95% of total world trade..The WTO is governed
by a Ministerial Conference, which meets every two
years; a General Council, which implements the
conference's policy decisions and is responsible for
day-to-day administration; and a director-general, who
is appointed by the Ministerial Conference. The WTO's
headquarters is in Geneva, Switzerland
Principles of the trading system
The WTO establishes a framework for trade policies; it
does not define or specify outcomes. That is, it is
concerned with setting the rules of the trade policy
games.[34] Five principles are of particular importance in
understanding both the pre-1994 GATT and the WTO:
1. Non-Discrimination. It has two major components:
the most favoured nation (MFN) rule, and the
national treatment policy. Both are embedded in the
main WTO rules on goods, services, and intellectual
property, but their precise scope and nature differ
across these areas. The MFN rule requires that a
WTO member must apply the same conditions on
all trade with other WTO members, i.e. a WTO
member has to grant the most favorable conditions
under which it allows trade in a certain product type
to all other WTO members.[34] "Grant someone a
special favour and you have to do the same for all
other WTO members."[35] National treatment means
that imported goods should be treated no less
favorably than domestically-produced goods (at
least after the foreign goods have entered the
market) and was introduced to tackle non-tariff
barriers to trade (e.g. technical standards, security
standards et al. discriminating against imported
goods).[34]
2. Reciprocity. It reflects both a desire to limit the
scope of free-riding that may arise because of the
MFN rule, and a desire to obtain better access to
foreign markets. A related point is that for a nation
to negotiate, it is necessary that the gain from doing
so be greater than the gain available from unilateral
liberalization; reciprocal concessions intend to
ensure that such gains will materialise.[36]
3. Binding and enforceable commitments. The tariff
commitments made by WTO members in a
multilateral trade negotiation and on accession are
enumerated in a schedule (list) of concessions.
These schedules establish "ceiling bindings": a
country can change its bindings, but only after
negotiating with its trading partners, which could
mean compensating them for loss of trade. If
satisfaction is not obtained, the complaining country
may invoke the WTO dispute settlement
procedures.[35][36]
4. Transparency. The WTO members are required to
publish their trade regulations, to maintain
institutions allowing for the review of
administrative decisions affecting trade, to respond
to requests for information by other members, and
to notify changes in trade policies to the WTO.
These internal transparency requirements are
supplemented and facilitated by periodic country-
specific reports (trade policy reviews) through the
Trade Policy Review Mechanism (TPRM).[37] The
WTO system tries also to improve predictability and
stability, discouraging the use of quotas and other
measures used to set limits on quantities of imports.
[35]
5. Safety valves. In specific circumstances,
governments are able to restrict trade. There are
three types of provisions in this direction: articles
allowing for the use of trade measures to attain
noneconomic objectives; articles aimed at ensuring
"fair competition"; and provisions permitting
intervention in trade for economic reasons.[37]
Exceptions to the MFN principle also allow for
preferential treatment of developing countries,
regional free trade areas and customs unions
